Reference no: EM132859055

Question - Full Tax Co. is incorporated and tax resident in Barbados. The audited financial statements for Full Tax Co. for year-end December 31, 2020 show an accounting profit after tax of $13,500 after charging the following:

Depreciation $5,300

Tax $1,500

Property Tax $10,000

Interest expense $15,000

Preference dividends of $40,000

Legal fees $110,000 to investigate what makes it up

Insurance of $75,000

Bad debts $4,000 is it general or specific

Foreign Travel $1,500 is it personal or company related

Repairs and Maintenance $50,000

General expenses $60,000

Other Information

1. Property Tax of $6,000 was paid for the property on which the company's factory is located; $3,000 for the office premises and $1,000 for the director's home.

2. The insurance was paid for the factory and office premises.

3. The interest of $5,000 was payable at the company's financial year end.

4. The bad debt expense is a percentage of debtors at year-end.

5. The company paid interim ordinarily dividends totaling $10,000.

6. Repairs and maintenance include motor vehicle repairs of $30,000 and redoing the office floor; changing it floor wooden flooring to porcelain titles.

7. Included in the company's total assessable income is exempt income of $30,000. $6,500 relates to expenses incurred in earning this exempt income.

8. Legal fees comprise expenses in respect of recovery of debts, $20,000. Expenses in relation to the purchase of new subsidiary $50,000. Expenses related to the increase private share capital, $40,000 of a subsidiary company located in Jamaica.

9. Foreign travel expense was a vacation package for the purchasing of marketing manager's (who met with company's clients) and his family plane tickets.

10. General expenses include $12,000 for the school fees of the director's son.

11. During the year Full Tax Co. invested $10,000 in the Enterprise Growth Fund. A certificate was obtained to support this investment. This no longer attracts 150%. Section repealed.

12. During the year the company obtained an internationally recognized environmental certification. Expenditure incurred to obtain this certification was $20,000. The company obtained a grant from the government to fund this expenditure.

13. The capital allowances have been calculated at $13,550.

Required - Calculate the Corporation Tax Liability of Full Tax Co. for Y/A: 2020. Using the Barbados Income Tax Act or any other relevant document explain the treatment of the items included or omitted from the income tax computation. The tax rates for general business in Barbados applies.

Tax rates: Assume capital allowance rate of 5 % p.a for building .

Please note that all amounts are in Barbadian currency.

Note that in Barbados there is no longer an initial allowance nor is there an Enterprise Growth Fund Allowance.